No big deal if iphone enters and general motors exits

No big deal if iphone enters and general motors exits

Appearances deceive. This week has seen some seemingly big announcements for Indian manufacturing: locally made iPhones will hit the stores next week and General Motors (GM) will wind up making cars for the Indian market and sell one of its two plants. Neither is a big deal, at least for now. The real value in products such as smartphones is in intellectual property and branding.
Only a small fraction of the value added in an iPhone accrues to China, where about half the 700-odd separate manufacturing activities that together create the iPhone take place, while the bulk accrues to the holders of intellectual property rights over the assorted technologies embodied in the phone. Very little of the value of an iPhone will be added in and accrue to India. The silver lining is that it could be the beginning of a process that culminates in significant value addition taking place here.
GM’s problem is not manufacture but marketing. It just has not been able to gain marketshare in India. As part of worldwide consolidation, it will wind up selling Chevrolet-badged cars in India, but continue to make them for export in its plant in Maharashtra. It is selling its Gujarat plant to a Chinese company, GAIC, which it partners. The Chinese company obviously hopes to succeed where GM failed and sees no difficulty in manufacturing cars in India.
Another carmaker, Volvo, has announced that it would begin assembling its cars in India. While this shows foreign investors do not baulk at investing in Indian manufacturing, it is not enough for India to realise value in manufacturing. Cars are increasingly growing electric. Can India gain some technological foothold in some part of the electric car ecosystem — battery storage, new-age materials that will make the car light without sacrificing strength, the hardware and software of the electric engines, assorted sensors, and so on? This, in turn, would lead to manufacture that produces value the bulk of which would stay in India.
India needs to focus on value realisation and not on just any tiny stage of value addition taking place in India, to create decent jobs and prosper as a nation.